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Consuming Industries Survey
Tuesday | 04 February, 2014 | 2:59 pm

A mixed bag

Written by By Lauren Duensing

Service centers, fabricators and OEMs head into 2014 intending to balance negative economic conditions with positive business strategies

January 2014 - In 2014 there will be “both positives and negatives, and I think they will balance out,” commented a service center respondent to Modern Metals 12th Annual Consuming Industries Survey. Among the positives, many of the surveyed service centers, fabricators and OEMs expect business to be good this year. One OEM respondent commented he has seen “steady growth the past five years and running.” Fabricators are looking forward to an increase in customer orders due to “overall better business levels” and “somewhat improved market trends and pent-up demand.” “Some markets are starting an upward trend,” said a fabricator respondent.

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Most metal-consuming markets are forecast to post better numbers in 2014, and some will reach levels they haven’t touched in years. Data from Edmunds.com indicates automotive new-vehicle sales will reach 16.4 million units in 2014—the highest total since 2006. Even the beleaguered construction industry can look forward to better days. McGraw Hill Construction’s 2014 Dodge Construction Outlook predicts total U.S. construction starts will rise 9 percent. Factors like increased job growth, low interest rates and an improved lending environment will help the industry reach this number.

“There is pent-up demand for big-ticket purchases of homes and motor vehicles,” according to The Manufacturers Alliance for Productivity and Innovation. “While both industries will grow through 2015, there is more upside potential in housing starts. The recovery in light vehicle sales is at a more advanced stage.”

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WHAT'S ON YOUR MIND?
Service centers, fabricators and OEMs/End Users will face a variety of challenges in 2014. Survey respondents cited overall economic uncertainty, health care, pricing, transportation costs and business activity levels as top concerns. In addition to the listed concerns, companies are uneasy about the “lack of understanding of business at a governmental level,” according to one fabricator respondent. A service center respondent also noted that “government gridlock and its negative effects on the economy” will affect business in 2014, while a fabricator said that “small businesses are swamped with government costs.”

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MAPI forecasts that mining and drilling equipment will show “modest gains” in 2014, high-tech industries “should accelerate in 2014 and 2015,” medical equipment production will post “strong growth thanks to demographic trends and the Affordable Care Act,” and aircraft production will “show strong growth” because of a large civilian aircraft backlog. MAPI also notes private nonresidential construction is declining and public construction activity will likely decline in 2014 due to austerity measures.

However, companies do have concerns. “There may be limited growth if the GDP grows at the 2.5 to 3 percent rate predicted by economists,” noted a service center respondent. Another was concerned that the “continued struggling economy and the uncertainty of Obamacare” would affect customer orders. OEMs added the “bad economy” and “uncertainty in the economy” were affecting their business.

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HEALTH CARE
The Patient Protection and Affordable Care Act was signed into law by President Barack Obama on March 23, 2010. Subsequently, the number of respondents concerned about the impact of health care on their businesses jumped. Numbers from Modern Metals’ 2011 Consuming Industries Survey show that 57 percent of service centers, 63 percent of OEMs/End Users and 65 percent of fabricators responding to that year’s survey cited health care as a top concern. The numbers have hovered in that range ever since. In early 2014, several significant reforms in the legislation, such as minimum standards for health insurance policies, individual mandate and health insurance exchanges, will take effect. As a result, Modern Metals asked respondents how they expect the ACA to affect their businesses in 2014. Forty-six percent of the total survey respondents are not sure, 49 percent expect it to affect their companies negatively and only 5 percent expect to see positive ramifications. “The perceived added cost and uncertainty will stymie growth,” commented a fabricator respondent.

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Striving for consistent performance

Service centers, fabricators and OEMs/End Users are striving to improve their productivity by identifying and employing better practices, actively monitoring and analyzing processes, ensuring labor and equipment are being used judiciously and implementing automation. 

A secure supply chain also ensures productivity—material comes in, lines keep moving and orders go out on time. “Our
MM-0114-survey-image3-2suppliers know what we use and keep a good level of those products,” said an OEM/End User respondent. Others commented on the necessity of a long-term relationship to ensure products arrive undamaged and in a timely fashion. “[My suppliers] keep me informed of price fluctuation; availability; special purchases, such as drops of metal we may need
lesser amounts of; and regular and prompt delivery,” said an OEM. “We have several suppliers who give us excellent service and an excellent product, and consequently, that’s where we purchase most of our materials,” added a service center. 

Respondents also highlighted the pitfalls of having to reach outside their regular network of suppliers. “We have a few tried-and-true suppliers, but we are finding more exotic materials and nonstandard material being requested. [Sometimes we] have a hard time finding material and then get long delivery dates that push us out of the running,” said an OEM. Other concerns respondents had regarding metal supply included long lead times, poor quality, inconsistency, trucking issues, short shipments and poor communication. “Producers continue to struggle to meet the delivery demands of our customers with little incentive to invest in measures that would lead to improvement,” commented a service center. 

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Competing for skilled workers

Overall, service centers, fabricators and OEMs/End Users are struggling to find adequately skilled workers to fill open positions. A fabricator said most people looking for a job have “a bad work ethic,” while an OEM/End User added, “[We’re] looking for people who want to work—not just collect a paycheck.” “It seems like the more they know, the less they want to do, whereas the people who are excited to work seem to scrap everything they touch,” said another OEM. 

When interviewing potential employees, it’s often difficult to discern “if somebody is honest, competent, wise and drug-free,” said an OEM. Another recounted his experience hiring a machinist. “After interviewing over 25 candidates, we finally hired a good machinist who chose not to show up or call to say he wasn’t coming in. [We] hired another one who was dependable but handled the material roughly and put out a substandard part.”

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Companies are looking for employees that are skilled, have mechanical aptitude and can handle basic mathematical problems. As a service center pointed out, trade or industry-specific skills and experience are difficult to find. “It’s tough to find the right level of qualification for our business,” said a fabricator. “Many of the workers are underqualified and many are overqualified.” 

In addition, basic skills are hard to come by, noted another service center, “[We’ve] replaced workers that have moved on with young kids. Most can’t read a tape measure and have little or no phone skills or people skills.” 

“All we have found are button-pushers,” said a fabricator respondent. “We need old-world people to operate our machines.”

As a result of this growing void of qualified workers, companies are taking matters into their own hands and providing training and education programs to their new and long-term employees. “We tend to hire unskilled labor at lower rates and increase their pay as they learn skills,” said a fabricator. Another added, “Our company is developing a welder training program to help with inexperienced new hires.”

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OEMs/End Users and fabricators are offering a wide variety of training programs, including safety, forklift, first aid, lean manufacturing, operational training, on-the-job training with experienced staff and apprenticeships. “Our company pays for any education relating to the metal industry. We also have an apprenticeship program for toolmakers and EDM,” said a fabricator. Service centers also offer on-the-job training, educational reimbursement and mentoring programs.

It’s a testament to manufacturing’s resiliency that in the face of these challenges, companies still are finding ways to grow stronger. A fabricator respondent commented that he saw an opportunity in 2014 to build a “sustainable business, rather than just a business. My competition hasn’t thought about sustainability yet.” This type of thinking outside the box will ensure when the U.S. economy finally decides to pick up, the metals industry will be ready. MM

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2014 SURVEY METHODOLOGY

In October 2013, Modern Metals emailed 5,510 surveys to a group of service centers, fabricators and OEMs. Seven percent of the selected readers completed the survey, and we received a total response rate of 386 usable returns. By industry sector, we received responses from 147 OEMs, 104 fabricators and 135 service centers. 

Those surveyed were randomly selected on an nth-name basis from Modern Metals’ circulation, using the following business and industry classifications: metal service centers and offices; fabricated metal products (including metal cans and shipping containers; cutlery, hand tools and general hardware; heating equipment and plumbing fixtures; fabricated structural metal products; screw machine products (bolts, nuts, screws, rivets and washers); metal forgings and stampings; coating, engraving and allied services; ordnance and accessories; and miscellaneous fabricated metal products); machinery, except electrical (including engines and turbines; farm/garden machinery and equipment; construction, mining, materials handling machinery and equipment; metalworking machinery and equipment; special industry machinery; general industrial machinery and equipment; computer and office equipment; refrigeration and service industry machinery; and miscellaneous industrial and commercial machinery and equipment); electric and electronic equipment (including electric transmission and distribution equipment; electrical industrial apparatus; household appliances; electric lighting and wiring equipment; household audio and video and audio recordings; communications equipment; electronic components and accessories; and miscellaneous electrical machinery, equipment and supplies); transportation equipment (including motor vehicles and motor vehicle equipment; aircraft and parts; ship/boat building and repairing; railroad equipment; motorcycles, bicycles and parts; guided missiles and space vehicles and parts; and miscellaneous transportation equipment).

Job titles surveyed included corporate officials, president, owner, vice president, general manager, treasurer-secretary, controller, chief engineer, plant manager, production superintendent, department managers, chief metallurgist, chief chemist, engineers, metallurgists, designers, production men, chemists, supervisors, foremen, and buyers, salespersons, and other purchasing and sales titles.

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Company Profiles

AIR FILTRATION

DEBURRING/FINISHING

NESTING SOFTWARE

SOFTWARE

Camfil APC - Equipment ATI Industrial Automation Metamation Inc. 4GL Solutions
Camfil APC - Replacement Filters Lissmac Corp.

PLASMA TECHNOLOGY

Enmark Systems Inc.

ALUMINUM

Osborn Messer Cutting Systems Inc. Lantek Systems Inc.
Richardson Metals, Inc. Supermax Tools

PLATE

SecturaSOFT

BEVELING

Timesavers Churchill Steel Plate SigmaTEK Systems LLC
Steelmax Tools LLC

IRONWORKERS

Peddinghaus

STAINLESS STEEL

COIL PROCESSING

Trilogy Machinery Inc.

PLATE & ANGLE ROLLS

Heyco Metals
Braner USA Inc.

LASER TECHNOLOGY

Trilogy Machinery Inc.

STEEL

Burghardt + Schmidt Group AMADA AMERICA Inc.

PRESS BRAKE TOOLING

Alliance Steel
Butech Bliss MC Machinery Systems Inc. Rolleri USA North American Steel Alliance
Red Bud Industries TRUMPF Inc.

PRESS BRAKES

TITANIUM

The Bradbury Group

MATERIAL HANDLING

MC Machinery Systems Inc. STS Metals
Tishken Fehr Warehouse Solutions Inc.

PUNCHING

TUBE & PIPE

CONVEYOR SYSTEMS

Steel Storage Systems Hougen Manufacturing BLM Group
Mayfran International UFP Industrial

SAWING

Prudential Stainless & Alloys

COPPER & BRASS

MEASUREMENT & QUALITY CONTROL

Advanced Machine & Engineering

WATERJET TECHNOLOGY

Concast Metal Products Co. Advanced Gauging Technologies Behringer Saws Inc. Barton International
Copper and Brass Servicenter Association

METAL FABRICATING MACHINERY

Cosen Saws Flow International Corporation
Farmers Copper Cincinnati Inc. DoALL Sawing Products Jet Edge Waterjet Systems

 

LVD Strippit HE&M Saw Omax Corp.

 

Scotchman Industries Savage Saws

ZINC

 

Trilogy Machinery Inc.

SERVICE CENTERS

Jarden Zinc Products

 

 

Admiral Steel

 

 

 

Alliance Steel

 


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